Most business owners think of tax breaks as something that comes with a brand-new building. But one of the most useful incentives in the tax code applies to the building you already have.
It’s called Qualified Improvement Property, or QIP. Under the One Big Beautiful Bill Act, qualifying interior improvements may now be eligible for a 100% first-year bonus depreciation deduction. On a $500,000 interior renovation, that could mean deducting the full $500,000 in the year the space is put to use, instead of roughly $33,000 a year for 15 years.
That’s a real difference in cash flow. Here’s how QIP works, what qualifies, and where good planning pays off.
What is Qualified Improvement Property?
In plain English, QIP is an improvement your business makes to the inside of an existing nonresidential building. Offices, retail spaces, warehouses, and manufacturing plants are all examples of nonresidential buildings.
Under federal tax law, an improvement generally counts as QIP when:
- It’s made to an interior portion of a nonresidential building. Work on the inside of the building, not the exterior.
- The building was already in service before the work. Improvements made during original construction don’t count.
- Your business makes the improvement. That doesn’t mean your own crew has to swing the hammers. Work done for you by a contractor under a written contract counts. What doesn’t count is the value of improvements a previous owner made before you bought the building.
What typically qualifies
The IRS doesn’t publish a checklist, but interior work like this is commonly treated as QIP:
- Non-load-bearing interior walls and partitions
- Ceilings, including drop ceilings
- Flooring
- Lighting
- Interior plumbing
- Some interior HVAC components, such as ductwork and controls
Think office remodels, breakroom and restroom updates, floor plan reconfigurations, and refreshes of aging interiors.
What doesn’t qualify
The law specifically excludes three types of work:
- Enlargements. Work that enlarges the building, such as an addition.
- Elevators and escalators.
- The internal structural framework. That includes load-bearing walls, columns, girders, beams, trusses, and other members essential to the building’s stability.
And because QIP is about the interior, exterior work doesn’t qualify either. That includes roofs, windows, facades, and rooftop HVAC units. Site work like parking lots is handled separately, too.
Most real projects are a mix. A renovation might include a new office buildout that likely qualifies and a structural change that doesn’t. That’s why it pays to scope the work clearly. Your tax advisor will make the final call on what qualifies.
How the tax benefit works
It helps to think of it in three layers:
- The starting point: 39 years. Most commercial building costs are written off over 39 years.
- QIP: 15 years. Interior improvements that qualify as QIP get a shorter 15-year schedule.
- The bonus: 100% in year one. For QIP acquired and placed in service after January 19, 2025, the One Big Beautiful Bill Act allows a 100% first-year bonus depreciation deduction. Unlike earlier bonus depreciation rules, which were phasing down each year, this one is permanent.
A few details worth knowing:
- The date is about the project, not the building. When you bought your building doesn’t matter. What matters is when the improvement was acquired, which is generally tied to when a written binding contract for the work is signed.
- You can choose a different path. Businesses can elect not to take bonus depreciation and use the 15-year schedule instead. Depending on your tax situation, that can make sense.
- Special rules apply to certain real estate businesses. For example, a real property business that elects out of the business interest deduction limit must use a 20-year schedule for QIP and can’t take bonus depreciation.
Why QIP may be new to you
If QIP sounds unfamiliar, there’s a reason. When the 2017 Tax Cuts and Jobs Act created QIP, a drafting error left it off the list of 15-year property. That stuck interior improvements with a 39-year schedule and no bonus depreciation, the opposite of what lawmakers intended.
The CARES Act fixed the error in 2020, retroactive to 2018. Bonus depreciation then began phasing down each year, until the One Big Beautiful Bill Act restored it to 100% and made it permanent for property acquired after January 19, 2025.
The bottom line: if you looked at how renovations are taxed a few years ago, the picture has changed.
For manufacturers: QIP and QPP work together
If you’ve read our post on the QPP deduction, you know it can let manufacturers deduct qualifying production space in year one. But QPP excludes areas like offices and administrative space.
QIP can help fill that gap. Interior renovations to office, breakroom, and administrative areas of an existing building may qualify as QIP, even though they wouldn’t qualify for QPP.
Where Design+Build makes a difference
QIP rewards clear thinking up front. Which parts of the project are interior improvements? Which parts touch structure or add space? How is the work documented?
With Design+Build, one team handles both design and construction, so those questions get answered early instead of sorted out after the fact. Here’s how we help:
- Scope with QIP in mind. We separate interior work from structural, exterior, and addition work during design, so your tax advisor has a clear picture.
- Document costs clearly. Organized, itemized cost records give your tax advisor what they need.
- Keep the schedule on track. The deduction is tied to when the space is put to use, so finishing on time matters for your tax planning.
- Work alongside your CPA. We’re glad to coordinate with your tax advisor from the start.
Owner checklist
- Is the work inside an existing nonresidential building?
- Was the building already in service before the work begins?
- Does any part of the project add space, touch structure, or involve the exterior?
- When will the contract be signed, and when will the space be ready for use?
- Have you looped in your tax advisor?
Ready to make your space work harder?
Whether you’re refreshing an office, reconfiguring a floor plan, or updating an aging interior, we’d be glad to talk it through, even at the “rough idea” stage.
Important disclaimer
General information only, not tax advice. Consult your tax advisor about your specific facts. State tax treatment may differ from federal rules. Information current as of September 2026.
Sources: 26 U.S.C. §168; IRS Notice 2026-11; IRS Rev. Proc. 2020-25; IRS Publication 946